What Is Construction Contract? What Are The Types Of Construction Contracts?

What Is Contract?

The construction of a can take place in different ways. If the building to be constructed is private property, the that will carry out this construction can be any company. However, if the building is a hall and belongs to the state, a tender is made and offers are received from construction companies. Particularly in public tenders, a certain tender cost is predetermined by the state. However, this amount is not shared with construction companies. The construction companies that enter the tender submit their bids. The firm that makes the closest bid to the cost determined by the state gets the job. This offer cannot be less than the amount determined by the state. If the construction company that takes the job completes the necessary documents, it gains the right to carry out the construction and the construction contract is signed.

The signed contract is a legal contract signed between the owner state or legal person and the firm. This contract is a formal contract with many legal clauses. The company that will carry out the work is obliged to complete the construction in return for the money promised by the employer.

What Are The Fundamental Elements of Construction Contract?

Signing a contract between the construction company and the employer imposes fundamental obligations on both parties. The contract is not one-sided. As the contractor company has obligations, the employer also has obligations according to the contract. The most basic of these are:

  • The construction company is obliged to complete the construction of the building within the time specified in the contract.
  • The construction company has to complete the construction of the building as specified in the contract.
  • The employer is obliged to fully pay the construction cost specified in the contract to the construction company.

What Are The Types Of Construction Contract?

Construction contracts are not uniform. More than one type of contract is encountered. So, how are these types of contracts determined? Contract types vary according to the variety of ways in which the construction cost is calculated. Contract types based on price calculation are as follows:

  • Lump sum contracts
  • Contract resulting from the recalculation of the price
  • Contract in which construction costs are reimbursed

One of the most common conflicts in a construction contract is the cost and time disputes between the . The above-mentioned types of contracts have also emerged for such situations.

Disputes Between the Contracting Parties

Disputes between the parties that signed the contract are usually caused by exceeding the time specified in the contract and economic loss. In long-term construction projects, the increase in costs may cause the contractor construction company to incur . This causes the construction to be prolonged. If such a situation arises, the construction company complains that it is making a loss, while the employer complains that the work is prolonged. As a result, the parties can go to court and start to seek their rights or one of the above-mentioned cost contracts can be signed again.

Apart from the contract types related to costs, other contract types are as follows:

  • Construction contract where the construction company and the employer are in the same country
  • Contracts based on a commercial basis
  • If the construction materials are imported from outside the country where the construction takes place then contracts with an estimated exchange rate difference
  • Contracts with the cost of construction and a fixed pre-specified fee
  • Contracts involving subcontractors
  • Contracts with special clauses, also known as implicit
  • Contracts determined by the percentage

Details of Different Types of Construction Contract

Some construction contracts are considered more important than others. Explanations of these contracts are given below.

Commercial Contracts

Such construction contracts are signed for buildings constructed for commercial purposes. These buildings cannot be houses where people live.

In-Country Construction Contracts

These contracts are not international construction contracts. It is a type of contract that, if executed, is limited only by the laws of the country where the construction takes place. However, the construction company may be foreign. But the construction contract has to be adjusted according to domestic laws.

Contracts With The Cost of Construction and A Fixed Pre-specified Fee

If this type of contract is signed, the employer has to pay the minimum amount committed to the construction company due to the provisions of the contract. Besides, an amount greater than the cost is paid at the end of the job.

This type of contract is a professional-grade contract. It is formed to eliminate the disputes between the contracting parties. Changes in construction costs and losses incurred by the company are covered. In this way, the construction company does not make any losses, and the construction is completed on time.

Contracts Involving Subcontractors

Contracts involving subcontractor construction companies are signed between the prime contractor company and the subcontractor company. In this type of contract, the contractor that gives the work is the prime contractor. However, the provisions of the main construction contracts are valid for the contractor company. In any legal situation, the addressee company is the prime contractor company.

Contracts Determined By Percentage

In cases where the tender price is determined before the tender, this type of construction contract is valid. With such contracts, the imbalance in tender prices is prevented.

Properties of Construction Contract 

Time of Construction Job

construction contract must have certain characteristics. If it does not have these features, it is not possible to talk about the existence of a construction contract. First of all, dates should be specified in the contract. Some flexibility should be applied based on time so that the contractor and the employer do not mutually harm.

Finalizing The Job

With the completion of the job and the delivery of the building to the owner, many responsibilities of the contractor company are covered. The employer identifies the deficiencies of the structure and may request a correction. These provisions should be included in the contract. It is obligatory to pay the contractor company that completes the required deficiencies. After the completion of the job, the contractor company is certified.

In the construction contract, a period for the completion time of the entire construction can be determined, as well as partial periods. For example, deadlines are granted for only certain parts of the construction, and payment is made partly. Since both the contractor company and the employer do not have economical and moral damages, all details should be considered and added to the contract before the start of the job.

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